Tag: what is gst

The Goods and Services Tax is an indirect tax applied in a uniform rate on goods and services. It is a single form of uniform tax that is applied across the country on goods and services, where they are considered at par. By doing this, other indirect taxes, such as VAT, CST, Service Tax, etc…, will be eliminated.

Like in the introduction of any other reform, implementation of GST, a new law, a new tax, will bring about new challenges. These challenges will need to be tackled with appropriate understanding and care. The application of GST will have a direct and indirect impact on specially the common man.

There are four slabs rates, a four tier GST rate structure, which has been agreed upon and passed on the 3rd of November 2016.

Currently GST is at an implementation stage and in its infancy to truly understand the positive or negative impact of it. It is only time, that will make it clear to comprehend the impact of GST on various sectors.

Below are a few indicators of what could be considered as positive or negative changes, once GST is implemented.

Positives of GST

A single tax replacing a cluster of indirect taxes

GST will make the taxation system simpler as compared to the earlier tax structure

GST will eliminate the cascading impact of tax over taxes

Since the new tax reform, GST, will lower the burden of taxes on manufacturing sectors, the manufacturing cost will be reduced, directly impacting the cost of consumer goods.

Such benefits of low cost on certain products will be passed on to the common man, making it possible for him to pay less for the same goods that would cost higher in the past.

The lower cost will enable the common man to increase his purchasing power, consecutively increasing demand

This will lead to rise in production and successively increase job opportunities in that sector.

GST will eliminate black money

A unified taxation like GST will also eliminate corruption

Negative Impact of GST

The service charge before implementation on GST was 15%, GST will be charged at 18% on most of the services, and on certain services it will go up to 28%. Hence it translates into paying more for certain services like banking, airline travel, telecom, as taxation on it is likely to increase.

The dependency of the common man will rely completely on tax professionals as there will be a great deal of confusion in understanding the implication of GST

An initial increase in inflation will be seen, which is predicted to settle down in time.

There will be a need to thoroughly check the profiteering activities, o that the final consumer can enjoy the real benefits of GST.

Like in the initial phase of any change, there is a lot of confusion and emotional unrest, all in the effect of understanding how to apply the process of GST correctly, however with time familiarity will increase and calm will take over.

It is important to reiterate and understand that GST should actually be considered as a long term strategy, planned by the government, where the true impact can be deciphered only in the long run. And the success of GST, will depend on its seamless introduction and implementation.